The effect of investor-driven information diffusion on excess comovement: Evidence from retail and institutional investors in China and the United States

Fei Ren, Miao-Miao Yi, Zhang-Hangjian Chen and Xiang Gao

Papers from arXiv.org

Abstract: This study investigates how cross-stock information diffusion, driven by both retail and institutional investors, influences excess comovement in the Chinese retail-dominated market and the U.S. institution-dominated market. Using data from 4,533 Chinese stocks and 4,517 U.S. stocks from 2010 to 2022, we identify three key findings. First, the dominant investor group in each market significantly drives excess comovement. Specifically, in China, compared with institution-driven diffusion, retail-driven information diffusion has a notably stronger effect on excess comovement. In contrast, in the U.S., institution-driven diffusion is the primary driver of excess comovement, surpassing the influence of retail-driven diffusion. Second, we identify investors' trading behavior as the underlying mechanism through which information diffusion affects excess comovement. Third, we observe a lead-lag relationship: stocks with faster retail-driven information diffusion exhibit comovement that precedes those with slower diffusion. Based on this finding, we further demonstrate that the predictive power of information diffusion varies across markets. In China, retail-driven diffusion shows strong and persistent predictability for excess comovement, whereas in the U.S., institution-driven diffusion exhibits similarly robust predictive capacity.

Date: 2026-05
References: Add references at CitEc
Citations:

Published in Journal of International Financial Markets, Institutions and Money 106 (2026) 102258

Downloads: (external link)
http://arxiv.org/pdf/2605.08726 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2605.08726

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().